Why Upperclassmen Lose Financial Aid

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CreditCreditViktor Koen for The New York Times

By Rochelle Sharpe

April 6, 2016

A few weeks before Ashley Hurst was supposed to commit to college, an email arrived that she thought would change her life. An honors graduate from a magnet high school, Ms. Hurst had been accepted into several colleges with a few good financial aid offers. But they included about $8,000 in loans, and she was dead set against borrowing any money. She kept hoping to snag a free ride somewhere at the last minute.

Then came the message from North Carolina Central University, a historically black college: It would be interested in giving her a full scholarship to study pharmaceutical sciences, a relatively new program aimed at helping students move into biotechnology jobs. Ms. Hurst called the scholarship committee the next day, and after a phone interview got a formal offer. She immediately accepted the terms, including the requirement to maintain a 3.8 grade-point average.

“I felt really, really relieved,” she recalled. “I felt like the hardest part of college was over.”

But though Ms. Hurst had focused on science in high school, she quickly discovered she couldn’t keep up with the work. At the end of freshman year, she had to forfeit her scholarship. So she spent last summer searching for new sources of money while working as a cashier at Home Goods. She applied for more than 30 scholarships. She didn’t get any, and returned to school last fall as a criminal justice major, yet another student taking out more loans — $18,500 so far — than ever expected.

Ms. Hurst’s predicament is all too familiar to students hunting for college bargains. Focused on cost, they attend the institution that showers them with the most money. But many learn a bitter economic lesson once they enroll: The debt can mount during the course of an undergraduate career, thanks to fine print, tough academic requirements on grants, and unanticipated tuition and fee increases.

Financial aid for upperclassmen is especially inscrutable, despite highly publicized government campaigns to make pricing more transparent. The Financial Aid Shopping Sheet is supposed to help families understand the details of award letters, while net price calculators let consumers discover how big a discount they might get off a college’s sticker price. But neither of these tools, nor any data on the Department of Education’s College Scorecard, forecasts anything about the costs of sophomore, junior or senior year. And though the government collects reams of statistics on education, there’s little about how financial aid changes for upperclassmen.

“This is an odd kind of industry with odd kinds of transactions, which are highly susceptible to embellishment and manipulation,” said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities. No other consumer purchase has so many pieces of financial machinery in motion, he said, with prices constantly rising, opaque discounting practices and terms subject to change. “It’s the ultimate faith-based financing scheme,” he said.

With so little transparency, planning for college becomes almost impossible, said Rohit Chopra, who helped establish the Consumer Financial Protection Bureau. “It’s a recipe for more and more student debt.”

There is one national survey that does regularly track how students’ financial aid changes: the National Postsecondary Student Aid Study. An analysis of it for The New York Times by Brad J. Hershbein, an economist at the W. E. Upjohn Institute for Employment Research, shows a decided drop in grant aid as students advance in their undergraduate careers.

In the 2011-12 academic year, Dr. Hershbein found, students at private colleges lost an average of about $1,000 in institutional grant aid between freshman and senior year, more than a 6 percent drop from the average freshman grant of $15,800. Results were quite different at public universities, where the dollar value of institutional grants — an average of about $4,600 — remained relatively steady year to year. But far fewer students received them. Only 31.8 percent of freshmen at public colleges got institutional scholarships, compared with 79 percent at private colleges. And that dipped to a low of 28.7 percent during students’ junior year.

Dr. Hershbein, who is also a Brookings Institution fellow with a focus on the economics of education, said he had seen similar patterns in 2003-4 and 2007-8. (The survey sample from individual institutions is too small to use to identify trends at specific colleges.)

It’s often understandable why upperclassmen would have higher out-of-pocket costs than freshmen. As Ms. Hurst discovered, grants may disappear because of academic problems. Transferring schools has an impact, too, given that transfer students routinely get less money than freshmen. Robert Kelchen, an education professor at Seton Hall University whose research focuses on higher education finance, explains why. Transfer students, he notes, don’t count in federal graduation rates, let alone the algorithms that go toward rankings and reputation. So campuses aren’t invested in luring transfers with a competitive financial aid package; rather, the money is directed at wooing the best freshman class.

Fallout from rising tuition and fees is another big factor. Colleges rarely increase monetary gifts to compensate for higher costs. (Some campuses do acknowledge the trend. New York University, for example, now offers special grants for students in their final semesters, and the University of Dayton guarantees that even if a family qualifies for less need-based federal aid in later years, their tuition and fee payments will not rise.)

And, finally, there’s the concern that colleges and universities, especially financially troubled ones, front-load merit aid to entice students to enroll, then lower or cut the award in later years.

After analyzing the federal survey data, Dr. Hershbein remarked, “If I were an Education Department official investigating whether colleges front-load aid and I saw these patterns, I would ask for a lot more detail and information.”

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Merit aid began proliferating as a potent recruiting tool several decades ago, often offered to fence-sitters who might enroll if nudged in just the right way. In the brave new world of big data, colleges can estimate how much money it takes to attract specific types of students, and studies show that families find named awards more appealing than just a pile of money. Most education experts find this kind of marketing perfectly acceptable. “Institutions have bills to pay and don’t make money in the basement,” Mr. Nassirian said. And many consider giving freshmen more grants than upperclassmen defensible — as long as they know what is going on.

After receiving complaints from consumers about confusing award letters, the National Association of Student Financial Aid Administrators updated its code of conduct in 2014, including a recommendation that members clearly spell out scholarship renewal requirements.

The problem comes when there’s no warning. “I’ve been a trustee of a number of universities and I’ve seen this,” said Harold O. Levy, executive director of the Jack Kent Cooke Foundation, which supports low-income students. “They tend to mislead students into believing they’re going to be getting the same amount of money for four years.”

He recalls the issue being raised at one university board meeting and talking with students “who clearly thought they would get the money” the next year. He declined to name the institution. Among the boards on which Mr. Levy has served are Cornell University, which does not award merit aid, the for-profit Kaplan University and Pace University. A Kaplan spokeswoman said all its awards are renewable as long as students meet G.P.A. requirements. Pace said its practice is to “maintain the amount of aid that is given to students when they first enroll.” Neither could provide data on grants to upperclassmen.

Larry A. Griffith, senior vice president overseeing scholarships at the United Negro College Fund, said he has received dozens of calls from students, including those at predominantly white colleges in Pennsylvania, Maryland and North Carolina, whose scholarships have been cut and are looking for money to stay in school. About two-thirds of the fund’s programs are geared toward helping upperclassmen, he said.

Grant displacement, wherein colleges rescind aid when a student wins an outside scholarship, is another way to diminish financial aid packages. Mr. Griffith administers the Gates Millennium Scholars, funded by a $1.6 billion grant from the Bill & Melinda Gates Foundation to let talented minority students from low-income backgrounds attend college with minimal loans. The foundation selects 1,000 applicants each year, notifying them of their awards in mid-April, after colleges have sent out acceptance letters and financial aid offers for freshman year. The Gates program then pays for all of a student’s unmet need.

After freshman year, the “very generous awards all of a sudden disappear,” Mr. Griffith said. He knows that because the Gates program picks up the difference. The program pays about 24 percent of scholars’ freshman-year costs, but almost 43 percent of sophomore costs.

In Boston, one advocacy group told students to avoid several colleges where scholarship cuts had been occurring frequently. “We were noticing changes in grant packages, with much different aid in year two,” said Greg Johnson, chief operating officer of Bottom Line, a nonprofit organization to help low-income students get into and graduate from college. “It felt like it was a marketing tool. They needed to fill their freshman class.”

One school he warned students about was Pine Manor, a small, suburban women’s college that went coed in 2014. He stopped dealing with the college in 2009 because of his concerns.

“We’re not baiting and switching people,” countered Richard M. Regan Jr., who has been Pine Manor’s executive vice president of finance and administration for less than a year. “Cutting grants is absolutely, categorically not happening,” he said, producing four years of data to underscore the point.

The college, with operating losses close to $8 million between 2009 and 2011, had been experimenting with ways to build enrollment. “We’re always on the brink of the abyss,” Mr. Regan said. In 2012, it increased grants for incoming students by about $2,800 but couldn’t afford them, he said, and had to lower the amount for subsequent classes. But no one he asked, he said, knew of front-loading in the past.

Enrollment managers say it would be career suicide to reduce financial aid. “Enrollment management is also about retention,” said Jon Boeckenstedt, an enrollment manager at DePaul University in Chicago and author of the Higher Ed Data Stories blog. “If you want students to leave, the easiest way is to take away their financial aid.”

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Most grants get derailed for a valid reason. For many students, G.P.A. requirements and deadlines for filing paperwork are the big stumbling blocks.

At Bridgewater State University in Massachusetts, hundreds of upperclassmen lose institutional grants because they forget to file their financial aid forms on time, said Paul F. Jean, the vice president for marketing and communications. “First-year students,” he said, “are more attuned to deadlines.”

Anthony Aviles, a Bridgewater student, had a tough first year. His mother was repeatedly hospitalized; his father was laid off. When his G.P.A. dropped below the 2.0 threshold to keep his grant, he lost more than $9,000 in aid.

Students put on academic probation for the first time can file an appeal explaining how they plan to improve their grades, and grants are usually restored for the following year, said Elsa Martinez-Pimental, who worked on Mr. Aviles’s case as a counselor at uAspire, a nonprofit agency that helps students with financial issues.

But Mr. Aviles did not realize he had lost his aid until January of his sophomore year, and by the time he filed an appeal, the university would not retroactively pay for his fall bill. Mr. Aviles’s father, a maintenance man, did not qualify for an education loan so he had to borrow money from his former boss.

“There are so many technicalities,” Ms. Martinez-Pimental said. Some upperclassmen, she said, have to fill out five forms with different deadlines to get government and institutional aid renewed. Aside from paperwork problems, students can lose aid if they don’t take the correct distribution of credits or don’t complete at least two-thirds of the credits they are attempting to earn.

Another tripping point: Some colleges “impose a G.P.A. that half the students can’t keep,” said Sandy Baum, senior fellow at the Urban Institute.

Mr. Griffith often talks donors out of setting G.P.A.’s at 3.5 when they want to establish awards through the United Negro College Fund because, he said, even stellar high school students might underestimate what they can achieve in college, often losing half a grade point when they make the transition.

The threshold for a government Pell grant is usually 2.0. If students need anything higher than a 3.0, they’re being forced to play Russian roulette, Mr. Nassirian said.

Baylor University in Texas, New York University and Eastern Michigan University offer some scholarships that mandate a 3.5 G.P.A. for renewal. At Utah Valley University, recipients of the full-tuition Presidential Scholarship must maintain a 3.7 G.P.A., and Piedmont International University in North Carolina wants a 3.8 on some awards.

But students awarded the most competitive scholarships are high-performing enough to keep them. At Baylor, which awarded 381 full-tuition scholarships last fall, fewer than five a year are lost, said Lyn Wheeler Kinyon, assistant vice president for financial aid.

It’s the more average students who appear to have the most trouble hanging on to their awards. At St. John’s University in Queens, 18 percent of freshmen lose their G.P.A.-restricted scholarships. For years, 30 percent routinely lost Academic Achievement Scholarships that paid between $5,000 and $12,000 because they could not maintain the required 3.0 average. The university became so concerned that it dropped the minimum to 2.75 last fall, and forecasts that only about 12 percent of students will lose it this year, said Jorge L. Rodriguez, the vice provost.

Similarly, in Georgia 81 percent of students retain the state’s full-tuition Zell Miller Scholarship with its 3.3 G.P.A., but only 64 percent retain the less lucrative Hope Scholarship, which requires a 3.0.

When Ashley Hurst learned about the 3.8 G.P.A. requirement for North Carolina Central University’s full-tuition scholarship, she wasn’t concerned. She had maintained the same average in high school. She was eager about her studies — a university official had mentioned that a major in pharmaceutical sciences would be a good foundation for a career in forensic science, which is what Ms. Hurst thought she wanted to pursue.

But she had entered the Biomanufacturing Research Institute and Technology Enterprise program, begun in 2006 to help make the university a leader in biotechnology. David J. Kroll, chairman of the pharmaceutical sciences department from 2008 to 2011, said the program was so academically challenging that about 25 percent of its 120 students left the program each year during his tenure. He also said that without A’s and B’s in both high school biology and chemistry, no one had been considered for scholarships, which were typically awarded after face-to-face interviews, not phone interviews like Ms. Hurst’s. A university spokeswoman declined to comment, citing student privacy regulations.

Ms. Hurst said she was the only person in her chemistry class who hadn’t taken the subject in high school. She sat in the back of her classroom feeling lost and said she couldn’t find help. Often, she stayed up studying until 4 a.m. yet got C’s and D’s.